Small businesses are closing their doors nation wide, and businesses are cutting hours, laying off staff, and reducing payroll. But they are not alone. Major international corporations are also feeling the pinch, and are desperate to find ways to survive. Gannet publishing, the largest U.S. based newspaper publisher, is going to be forcing some 40,000 employees nationwide to take one week off without pay in an effort to save money. Some have been forced to declare bankruptcy, including Circuit City, Nortel Networks, a leading producer of phone technology, and petrochemical giant LyondellBasell.
Of course, when companies reduce their employees pay through staffing cuts and unpaid furlough, they also reduce their expendable income, leading to further profit losses nationwide, necessitating ever greater spending cuts. When the economic upheaval reaches such a level, when it has pervaded the auto industries, the technology industries, the retail industries, the service industries, the manufacturing industries, even the pornography industry, businesses face no simple choices. Survival becomes a matter of making the right decisions, quickly, and trying to convince the consumer that the ever decreasing amount of expendable income he does possess is most wisely spent patronizing your establishment. Even then, without a lot of luck businesses will continue to fail.
But there is one corporate entity which is able to create solutions to their own economic shortfalls. That would be your friendly, benevolent, always looking out for what's best government. They're feeling the pinch too, but they've got some ideas. First, there's President Elect Barack Obama's economic plan. It includes
getting credit flowing again
reform the oversight and regulation of the finance sectors
supplement individuals who are struggling to make mortgage payments
improve oversight of taxpayer funded services
increase public welfare in the form of unemployment and food stamp benefits
supplement state costs for public services with federal funding
build more bridges and roads
make government buildings more energy efficient
computerize medical records
increase school funding
and making sure everyone has access to high speed internet
You can find more information on his plan at these sites, although specifics seem to be hard to come by.
Now, read that list slowly. Really think about it. You are a smart person. You are a capable person. You are able to answer some questions on your own. How will the government get credit flowing again, and if they could, why haven't they already? How will increased oversight, which I have shown you in previous articles is rank with corruption, regulatory capture, and waste, jump start a failing economy? How will more welfare programs and government stimulus checks improve the lives of people who will then have to fund those very expenses from their own pockets through taxation and inflation? How will increased federal spending to the states in the form of building improvements, road work, and public service reimbursements get you more money in your wallet? How will computerized medical records and high speed internet keep international corporations from going out of business? You are not stupid.
But you are scared, and it is that fear that the government is more than happy to use to manipulate you into supporting their initiatives. The reality is that increasing funding to our failing government schools, even if we grant the premise that they serve some positive purpose, which I don't, will not help get us out of this economic crisis. Even if increased funding was some benchmark of improved performance, and it isn't, the theoretical benefactors of that funding, the schoolchildren, are in no position to rescue this economy. While having high speed internet will certainly help some businesses increase revenues and cut costs, and computerized medical records would help streamline the medical industry making healthcare more affordable to some, neither of these moves is sufficient or integral to preventing a complete economic collapse, which is what we are facing.
Most important however, even more important than addressing whether or not any of these ideas are anything more than pure government opportunism, is where the funding for these schemes will come from. You see, government is facing the same financial hardships as the rest of us. In California, the state government has decided that in lieu of issuing tax returns to their citizens, they will issue IOU's, with the promise that when things get better, the citizens will get their money. Pause on that.
A tax return occurs because you accidentally overpaid the government ahead of time in estimation of your final tax burden. When your final tax burden was assessed, and they realized you paid them too much, they are supposed to return the difference. Imagine if you gave the clerk at McDonald's your money before you ordered your food, and when he realized you overpaid, he gave you back the change. Only in this instance, the state of California has decided to keep the change. It's not their money, it never was, they were holding it, interest free, against a future debt you expected to incur. Upon finding out that your did not actually incur that debt, or that it was less than anticipated, they are keeping the money.
This is no joke, and it is certainly no laughing matter. Only a state which claimed proprietary ownership of you, your possessions, your labor and it's fruits would believe that they have the inherent right to keep this money, and this state is doing exactly that.
In the state of California, some have suggested that the solution is more taxation, meaning that they should take away more of their citizens money, when they have already shown both incompetence in it's stewardship and an unwillingness to return what they have taken in error. Others have suggested that they should receive greater amounts of federal funds, meaning that the citizens of other states should be burdened additionally, in these uncertain times, so that someone deemed more deserving may benefit from what you worked hard to earn. All of this is being bandied about with little or no awareness of the irony of it all. That a failing idea can be fixed with stricter adherence to it's precepts, and greater commitment to it's goals.
Don't make the mistake of thinking that this sort of behavior is some kind of quirk of the California legislature, or that they are simply proposing these ideas because they have been out in the sun too long. This is how states do business. Circuit City has to entice you to spend money there, and failing that, they are closing their doors. The state on the other hand, simply takes what you have. If your resist, they use force. When you don't have enough for them to take, they take it from someone else. You exist only to fund the state, and your agreement is not necessary. That is how the state addresses tough financial times. We need only look to history to learn what they will do.
But ultimately, we know what they will do. They will simply create the money out of whole cloth. Oh, they will increase taxes and raise tarrifs and levy fines, but most will simply be imagined into reality. Some will be printed new, but a large percentage of it will never even exist. It will simply be created by an entry in a ledger, checks will be printed and passed, and numbers moved from column a to column b. The end result is of course the same, more inflation and devaluation. But that's a problem for another day.
And we still haven't addressed today's problems yet.